It is popular in backgammon, the Melbourne Cup, and college basketball pools during March Madness.
The contestant will then pay out to the owner a predetermined proportion of the pool depending on how it performs in the tournament.
While variations in payoff schedules exist, in an NCAA Basketball tournament (64 teams, single elimination, maximum six wins) the payoffs could be: The precise rules of a Calcutta can vary from place to place; many tournament organizers employ software programs that apply odds and determine win-place-show amounts.
For example, even if a bidder knew the University of North Carolina would be the tournament winner and thus pay out 32% of the pool, he would still be unsure of the exact value of the team (unless it was the last team being bid on) since the payout depends on the sum total of all winning bids, i.e. the final size of the pool.
As bidding evolves, this aids bidders in estimating the final pot size since the heavily favored teams that command the highest bids are auctioned at the end, thereby limiting the risk on the larger bets.